Ethics & Regulatory Guidelines Flashcards

The 'prudent investor rule' standard requires investment advisers to:

Answer: Make investment decisions as a knowledgeable investor would, considering the entire portfolio

The prudent investor rule requires advisers to manage investments as a prudent knowledgeable person would, focusing on the overall portfolio context.

Soft dollar arrangements involve:

Answer: Using client brokerage commissions to pay for research and services

Soft dollar arrangements use excess client brokerage commissions to obtain research or other services that benefit the adviser.

An investment adviser's code of ethics must include provisions for:

Answer: Reporting personal securities transactions by access persons

SEC rules require registered investment advisers to maintain a code of ethics requiring access persons to report personal securities transactions.

Form ADV Part 1 is primarily used for:

Answer: Registering with the SEC or states and providing regulatory information

Form ADV Part 1 is the registration application used by investment advisers to register with the SEC or state regulators.

Under the '40 Act, which of the following investment advisers would be required to register with the SEC?

Answer: An adviser with $110 million in AUM

Advisers with $110 million or more in AUM are generally required to register with the SEC; those below $100 million typically register with states.

Which of the following constitutes 'scalping' as an unethical practice for investment advisers?

Answer: Recommending securities the adviser has a position in without disclosure, then selling after price rises

Scalping occurs when an adviser buys securities, recommends them to clients (driving up price), then sells their own position at a profit.